PayPal buys Japanese buy-now-pay-later player Paidy for $2.7bn

It's hip to be competing with Square for space on retail counters

PayPal has announced it will acquire Japanese internet payments outfit Paidy.

The deal will see $2.7bn change hands, in return for which PayPal gets Paidy's buy-now-pay-later (BNPL) and credit-card-free payments offerings.

BNPL players offer consumers the chance to pay for goods online without a credit card, then pay for it in instalments. They don't charge interest, but do charge late fees for missed instalments. Those fees can sometimes be cheaper than credit card interest, but can also add up over time. BNPL companies win either way, because merchants pay a fee for each purchase made using the schemes.

Paidy's system is a little different to other BNPL products as it offers the chance to make instalment payments in cash at a convenience store. Direct debits and bank transfers are also options.

The company has come to dominate Japan's BNPL sector and, as PayPal points out, the nation is the world's third-largest e-commerce market.

Buying in to a big local player has clear potential for PayPal. But the deal also suggests that PayPal may not be super-confident that its own BNPL product – which it rushed into development during 2020's COVID-19 lockdowns – may struggle to deliver in Japan.

PayPal also knows that Square, the enfant terrible of credit card payments for smaller retailers, has acquired BNPL leader AfterPay and pledged to integrate it into point-of-sale tech.

Paidy's convenience store connection therefore gets PayPal onto the counter in ways it's not found easy to achieve with its other real-world retail forays. ®